How High Will Airobotics’ Drone Fly?

By Assaf Gilad and Dan Schwartzman

Is it a plane or a bird? Neither. It’s actually Airobotics autonomous drone – perhaps the most flexible autonomous drone today. Its ability to fulfill a multitude of missions and stay as long as possible in the air, according to a Zirra’s series of research reports on Drone companies, is what makes this product so impressive.

Airobotics offers an end-to-end automated industrial drone platform, tailored for inspection of complex industrial environments including mining, seaports, factories, oil, and gas. The system contains airbase landing dock, drones and a software that enables mission planning with repeatable pre-programmed flight scheduling, eliminating the need for a drone pilot or operator.

Using Airobotics’ end-to-end platform, companies can set up an airbase on their property and benefit from having a drone present at all times for tasks like surveillance, equipment inspections, inventory calculations, mapping, and other functions. The Airobotics solution is automated, meaning no drone operator is needed, and a drone can be launched at any time with no delay, or be scheduled for pre-set missions.

Airobotic’s advantage over the others, or its IP, is found in its secretive landing mechanism (It’s for drones to take off, much harder to land at an exact spot). While the Verge called Airobotics’ airbase “the most high-tech landing pad, we’ve seen from a drone company yet.”

Another valuable IP, the company, holds relates to its charging system, a set of mechanical devices that allows the drone to land, replace a battery, and take off instantly after. Airobotics even employs execs from Better Place, a company that tried to develop electric cars with a battery replacing mechanism.

**This post is based on a series of deep analysis reports dedicated to drone companies. If you wish to order a deep analysis report on a startup company, search it and order the report here **

Unclarity About the Drone Market

The first impression of the worldwide drone market is that of climbing in a right, 45 degree line. After all, there are more drones in the sky: in social events, in parties, and maybe in your neighbor’s yard. Amazon Prime Air launches a new development or a trial each day, and more and more e-commerce retailers join the effort to develop a fleet of delivery drones of their own.

But this picture is somehow misleading. The consumer drones market has been taken over by Chinese giant DJI, pushing aside American 3D Robotics to pivot from drones producing software. Dozens of drone companies had to shut down or pivot. Even Alphabet had pulled out from its plans to beam the Internet from the sky using its Titan drone program, and Facebook has been struggling with its similar project, Aquila.

The drone delivery market is still in its cradle thanks to the lack of proper regulation and the immaturity of the delivery drones, short of adequate reliability, such that will make them safe from falling from the sky while delivering a pizza.

Is the drone market growing? It depends on who you ask.

The market in which Airobotics operates, the industrial UAV drone market, is highly competitive. However, it is open to a large range of industries, including defense, agriculture, land management, energy, and construction, creating a larger market base.

According to PWC, the total addressable value of drone-powered solutions in applicable industries is estimated at over $127 billion in 2016. That figure represents the value of businesses and labor in eight industries that may be replaced by drones, including energy, roads, railways, and oil and gas. For instance, key drone applications in infrastructure like investment monitoring, maintenance, and asset inventory are estimated to represent a $45 billion of the total $127 billion addressable drone market.

Current estimates expect the market revenue from drone sales to grow from $10.1B in 2015 to $14.9B by 2020. According to a report published by MarketsandMarkets, the UAV market is forecasted to reach $28.27B by 2022 growing at a CAGR of 13.51%.

A drone takes off at Airobotic’s HQ in Petah-Tikva

The belief is that growth in revenue for the industrial drone market will outpace that of the consumer drone market, once regulations have opened up. However research firm IBISWorld see the things differently. According to the company, revenue for the UAV industry soared to a peak in 2010 but has since sharply declined in about 8% from 2010 to 2015 in the US due to a decrease in primary combat missions and congressional efforts to shrink the US federal budget deficit. However, in the next five years leading up to 2020, the relaxation of regulations on the export and commercial use of drones is expected to provide new growth opportunities for the industry.

DJI – and all the rest

Chinese drone manufacturer DJI dominates the drone market, with 70% market share. Other companies struggle to match DJI’s prices, and as a result, have chosen to focus on software or drone add-ons rather than compete with DJI on hardware. 3D Robotics, once DJI’s American competitor, had run out of the drone manufacturing business, had to shut down its production line and pivoted into a software. Autodesk now invests in the company to turn it into a flying scanner. 3D provides now a fully autonomous drone with a Sony camera and software, scanning a construction or manufacturing site, and building a CAD plan. In that way, 3D Robotics may escape a fierce competition with DJI, just to compete directly with a bunch of other full-stack drone startups, such as Kespry, DroneDeploy, and Airobotics.

While Airobotics has raised $28.5M, competitor DroneDeploy has raised $31M, Kespry has $28.35M in funding, and Skycatch has raised $46.67M to build an app to automate data capture, map territories, and enhance flight control. 3D Robotics has received $126.08M in funding, but spent most of it on an unsuccessful drone and have since pivoted to just doing software. In their recent re-incarnation, they have raised $26.7 million in debt and warrants.

But Airobotics is not merely a software company, although it has some proprietary flight management and cloud system. Much of Airobotics’ solution focuses on high-end and expensive hardware. Therefore, the effectiveness of the company’s complete end-to-end solution may convince some large industrial customers to pay the higher prices.

Software companies compensate for the lack of hardware through partnerships, such as Swiss drone producer senseFly signing an agreement with agricultural data gathering software company MicaSense and US drone services company Airware acquiring French drone analytics company Redbird as well as partnering with DJI for hardware. Through these partnerships, some companies that offer much less complete solutions than Airobotics can provide bundled services that compete more fully, often at lower prices.

There are some signs of consolidation in the drone industry, as evidenced by Airware’s acquisition of Redbird and Verizon buying drone operations company Skyward. However, Airobotics’ focus on an end-to-end solution may lessen their chances of being acquired by another company looking for particular expertise or products and may mean that the firm’s main path is to grow and compete with other industry leaders on their own.

Airobotics’ workshop

Pricing

There are doubts in the industry about Airobotic’s pricing and the viability of competing with market leader DJI in the drone hardware market. Airobotics does not publicize pricing, but our sources agree on the fact that Airobotics’ solution is expensive.

WIRED magazine wrote that Airobotics charges a monthly fee of “tens of thousands of dollars per unit” – for the drone, its software and servicing. In comparison, the DJI Phantom 4 PRO is considered one of the most advanced drones available (although it is mostly for consumer use) and is priced at $1,499, although this price is just a one-time payment for the drone itself. Pricing is unclear. But Airware, a company that presented a commercial drone for industrial use cases, is pricing its drones at $2,500 per drone per year.

It’s the regulation, stupid

Regulations are a continuing issue for drones. The company has noted that it currently works with clients on private property and that the regulation for operating in public spaces is still too limiting for the time being.

However, The Civil Aviation Authority of Israel (CAAI) was the first in the world to authorize commercial, entirely unmanned drone flight in their nation’s airspace, and it gave Airobotics the first license ever to do so. With this license, Airobotics will be the world’s first drone company to enjoy the freedom to fly autonomous drones for business purposes, on-site and on condition, the drone does not cross the customer’s facility’s borders. In the country, Airobotics already operates some drones in ICL factory in the Dead Sea, mapping phosphate piles, and securing Intel’s facilities in Kiryat Gat. However, the company’s growth in the U.S is restricted until the FAA will not solve the problem in the same way Israel did it.

The future of industrial drones… Delivering a pizza?

Airobotics and the entire commercial drone industry sees mining, oil & gas, seaports, and other industrial facilities as their primary target markets. In the long term, Co-Founder & CEO Ran Krauss has spoken of drones like theirs eventually being used in cities, initially in functions like emergency response, and eventually in everyday commercial use in services like package delivery, precise mapping for autonomous cars, real estate, and construction.

The industrial drone market is promising and is just opening up, as regulations develop and drones become more accepted. Additionally, Airobotics and their products have received positive reviews. However, the company has only worked with a limited number of customers and is seen as relatively expensive. To succeed, it is likely Airobotics will have to focus on lowering costs and gaining market share by adding a significant number of large customers in the industrial sector.

This post is based on a series of deep analysis reports dedicated to drone companies. If you wish to order a deep analysis report on a startup click here, search a company and order the report.

**This post is based on a series of deep analysis reports dedicated to drone companies. If you wish to order a deep analysis report on a startup company, search it and order the report here **

Blue Apron: Success, Risk and what lies ahead

Prepped delivery meal kit Blue Apron has finally filed for an IPO. The financial results place Blue Apron as the worldwide market leader regarding revenue but also poses some serious questions regarding the company’s ability to grow.

We’ve outlined some success factors, risk points and some comments on the company’s future. With right timing, management, and common sense, Blue Apron may be able to become the largest online restaurant in the U.S.

Success Factors:

Blue Apron‘s revenue is growing faster than its losses:  2016 ‘s revenue resulted in $795.4 million in revenue for 2016, up 133% from about $340 million 2015. However, losses grew only from $30.8 million in 2014 to $46.7 million in 2015 to  $54.9 million in 2016. It seems the company could create profit but preferred minor losses to maintain growth. But in the first quarter of 2017, the company had a net loss totaling $52.2 million—almost as much as all of the last year.

Source: Blue Apron’s S-1

“The biggest online restaurant in the U.S,” – Scale and incumbency: Blue Apron is probably the ‘Uber’ of meal kit industry. It is a pioneer in offering meal kit delivery service and still the world’s largest regarding revenue. Its German competitor, Hello Fresh, now competes with Blue Apron in its own U.S backyard. Hello Fresh‘s revenue in 2016 grew by 104%, less than the growth rate of Blue Apron. But while Blue Apron‘s cost of good sold doubled to $532.6 million, Hello Fresh‘s cost of goods is standing merely on half of the number. The two companies are losing money, but while Blue Apron‘s net loss grew in 2016, Hello Fresh‘s net loss went down by almost 20%.

Source: Blue Apron’s S-1 / Hello Fresh April 2017 financial statement

It’s all about data: If Blue Apron is the “Uber” of meal kit in its scale, it is also the “Netflix” of food delivery in the manner of data ownership. Blue Apron knows it customer’s taste even more than GrabHub or Yelp does, and collect data on personal preferences including ingredients, tastes, styles of food and timing.

Source: Blue Apron  

Read Zirra’s list of the 10 highest valued delivery startups here

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Risk Factors:

Low barrier to entry mean lots of competition: Entry barriers to the meal kit industry are low. All that you need is a digital asset, warehouses full of goods, and people to pack them and deliver them. Today, there are at least 18 meal kit delivery companies operating in the U.S alone, including Plated, Home Chef, Sun Basket, Martha & Marley Spoon, and Chef’d. The market is big enough to include varieties of services: vegan-oriented, supermarket-oriented and more. In this fragmented market, scale and resources are necessary to expand faster and become a giant.

Growing cost per customer, higher churn: Blue Apron‘s revenue increased significantly in 2016, but so did to cost of acquiring new customers. Blue Apron pays $94 per each new user and its marketing expenses in the first quarter of 2017 are bigger than the entire marketing budget of 2015. The cumulative net revenue per customer isn’t growing enough as seen here in the graph. For instance, an average customer that is subscribed for 36 months expands only $72 more than a 30 months-old subscriber.

Source: Blue Apron’s S-1

A halt in growth: The company’s increase in revenue in 2016 was high and impressive, but looking at 2017’s indicators, a halt in the company’s growth is apparent. According to Google Trends, there’s a sharp decline in Blue Apron‘s popularity since the end of 2016. At the same time, Hello Fresh grew in popularity so that the two companies are standing on approximately the same level now.

Source: Google Trends

Looking at LinkedIn’s HR data, employee count has been stopped growing for a few months, and last May it went down 1%. It is entirely possible that Blue Apron wanted to increase its workforce significantly before filing for an IPO, but a lack of future growth in these indicators is something to follow. The sudden increase in the company’s losses in the first quarter might be a hint to the way the company deals with the lack of growth.

Source: LinkedIn

In addition, as demonstrated by the below, it is not far from reality that users may order a few meal kits to try it out, and then they forget about it or are just less eager to seek to order more meals.

Source: Slice Intelligence / TheInformation.com

Growing competition from supermarkets: Retail chains have already discovered the fast growing market of meal kit and are offering kits with pre-measured fresh ingredients and instructions. These meal kits can be quickly picked up on the way home, saving delivery fee. The other reality is that supermarkets including Kroger, Publix, Hy-Vee and Mariano’s to name just a few, are stepping up with high-quality meal kits that we can pick up on our way home, which might be the fatal bullet for the burgeoning meal kit industry, no matter how much money they raise.

International expansion: In contrast to Hello Fresh, Blue Apron operates in the U.S alone, and in order to keep growing it will soon have to expand overseas. Blue Apron will have to find a more environmentally viable packaging solution for its meal kits. Millennials are buying meal kits also because they are more environment-friendly than grocery products. In average, people will throw three times as much food with regular home cooking than with a meal kit, according to a Nielsen study. But the multitude, tailor-made, and complicated packaging of meal kits that include portable coolers, freezers, and bags, makes the whole experience a little less environmental.

How to be the Amazon of Food: The fact that Blue Apron is, perhaps, “the biggest restaurant in America,” brings multiple scenarios of growth to the table, to compensate for the lack of growth. As meal kit delivery companies are focused on dinners, there is plenty of space in the breakfast and snacks. Chef’d, for instance, partnered with Quaker Oats to deliver meal kits for breakfast. Blue Apron will probably need to develop a brick and mortar presence to compete with supermarkets. Hello Fresh, for instance, already sells kits at Sainsbury in London. An acquisition is, of course, another great way to eliminate competition and acquire market share. After its IPO, if successful, Blue Apron can consider acquiring each of the smaller companies in the space. Plated is a great opportunity: it is covering the entire U.S market very well, it’s strategy focuses on offering quality food in places where the supply of mid-range quality food is lacking.

Comments on the company’s future

Blue Apron will probably need to develop a brick and mortar presence to compete with supermarkets. Hello Fresh, for instance, already sells kits at Sainsbury’s in London. An acquisition is, of course, another great way to eliminate competition and acquire market share. After its IPO, if successful, Blue Apron can consider buying each of the smaller companies in the space. Plated is a great opportunity: it is covering the entire U.S market very well, it’s strategy focuses on offering quality food in places where the supply of mid-range quality food is lacking. Also, Plated is cheap and valued at about $300-$400 million by Zirra, a startup that has developed big data and AI tech to better research companies.

Read Zirra’s list of the 10 highest valued delivery startups here

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